ITO 23(3)(1), MUMBAI V. PRAVIN DAMJI SHAH, MUMBAI

ITA 2809/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79413 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 10-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARMINDER
• Keywords: Unexplained investment; Additional evidence
• Section: 133(6); 68; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ITA NO.2809/MUM/2013 (ASSESSMENT YEAR: 2009-10) INCOME TAX OFFICER - 23(3)(1) ROOM NO.401, 4 TH FLO0R C-10 PRATYAKSHAKAR BHAVAN BANDRA KURLA COMPLEX BANDRA (E) MUMBAI-51. VS. PRAVIN DAMJI SHAH M/S. HARSHIL TEXTILES 107, SUPARSHWA SARVODAYA NAGAR, NAHUR ROAD, MULUND (W) MUMBAI-80. (APPELLANT) (RESPONDENT) P ERMANENT ACCOUNT N O . : AAGPS 8197 L ASSESSEE BY : SHRI VIJAY MEHTA AND SHRI ANUJ KISHNADWALA REVENUE BY : SMT. PARMINDER DATE OF HEARING : 1 5 /07/2014 DATE OF PRONOUNCEMENT : 25/07/2014 O R D E R PER VIJAY PAL RAO, JUDICIAL MEMBER: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 11/2/ 2013 OF CIT(A) FOR THE ASSESSMENT YEAR 2009-1 0. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL :- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETI NG THE ADDITION OF RS. 52,51,714/- MADE BY THE A.O. U/S. 6 8 OF THE INCOME-TAX ACT, ON ACCOUNT OF UNEXPLAINED INVESTMENT/UNEXPLAINED CASH, WITHOUT APPRECIATING T HE FACT THAT THE ASSESSEE DID NOT SUBMIT ANY DOCUMENTS/ EVI DENCES ITA NO. 2809/MUM/2013 AY: 09-10 2 IN SUPPORT OF HIS CLAIM FOR THE SAID PURCHASES, NOR THE WHEREABOUTS OF THE PURCHASE PARTIES WERE TRACEABLE. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) WAS RIGHT IN DE LETING THE ADDITION STATING THAT NO BENEFIT HAS ACCRUED TO THE ASSESSEE BY PURCHASES FROM THESE NINE PARTIES. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) WAS RIGHT IN DE LETING THE ADDITION AFTER GOING THROUGH THE ADDITIONAL EVIDENC ES IN SUPPORT OF GOODS RETURNED TO NINE CREDITORS DURING APPELLATE PROCEEDINGS, WITHOUT REMANDING THE MATTER TO THE AO . 2. GROUND NO.1 & 2 IS REGARDING DELETION OF ADDITIO N OF RS.52,51,714/- MADE BY AO UNDER SECTION 68 OF THE INCOME TAX ACT, 1961. 3. THE ASSESSEE IS A WHOLESALE CLOTH MERCHANT DEALI NG IN SUITING & SHIRTING. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS THE ASSESSEE WAS ASKED TO PROVIDE DETAILS OF SUNDRY CREDITORS EXCEED ING RS.5.00 LACS ALONG WITH PROOF OF PAYMENT. THE ASSESSEE SUBMITTED A LIS T OF 15 SUNDRY CREDITORS EXCEEDING RS.5.00 LACS OUT OF WHICH IN 9 CASES IT WAS STATED THAT GOODS VALUING TO THE OUTSTANDING BALANCE WERE RETURNED AND HENCE NO PAYMENT WAS MADE. THE TOTAL OF SUCH PURCHASES RE TURNED COMES TO RS.52,51,714/-. THE AO ISSUED NOTICE UNDER SECTION 133(6) TO THE PARTIES WHICH WERE RETURNED BY THE POSTAL AUTHORITIES WITH A REMARK NOT KNOWN. THE ASSESSEE WAS ALSO REQUESTED TO PROVE THE GENUIN ENESS OF ITS CLAIM OF SUCH PURCHASES WITH DELIVERY CHALLAN, DETAILS OF OC TROI RECEIPTS ETC. SINCE THE ASSESSEE DID NOT PRODUCE REQUISITE RECORD IN SU PPORT OF CLAIM OF RETURN OF GOODS, THE AO MADE AN ADDITION OF RS.52,5 1,714/- AS UNEXPLAINED INVESTMENT BY THE ASSESSEE AND ADDED T HE SAME TO THE TOTAL INCOME OF THE ASSESSEE . ALTERNATIVELY THE AO HAS A LSO HELD THAT THE ASSETS TO THE TUNE OF RS.52,51,714/- REMAINED UNEXP LAINED WITHOUT EXPLAINING THE GENUINE SOURCE OF INVESTMENT AGAINST THE SAME. THEREFORE THE SAID AMOUNT IS TREATED AS UNEXPLAINED CASH CRED IT UNDER SECTION 68. ITA NO. 2809/MUM/2013 AY: 09-10 3 THE ASSESSEE CHALLENGED THE ACTION OF AO BEFORE CIT (A). THE CIT(A) NOTED THAT THE ASSESSEE FILED STOCK STATEMENT AND COPIES OF LEDGER ACCOUNT OF THESE 9 PARTIES BEFORE THE AO. THE ASSESSEE HAS AL SO FILED COPIES OF P&L ACCOUNT AND BALANCE SHEET WITH ANNEX FOR FINANCIAL YEAR ENDED ON 31/03/2009. AFTER TAKING INTO ACCOUNT THE FACT THAT THE PURCHASE FROM THESE 9 PARTIES ARE DULY REFLECTED IN THE CLOSING S TOCK AS ON 31/03/2009, THE CIT(A) WAS OF THE VIEW THAT NO BENEFIT HAS ACCR UED TO THE ASSESSEE BY TAKING PURCHASES FROM THESE 9 PARTIES IN PURCHASE A CCOUNT AND SUBSEQUENTLY SHOWING THEM IN CLOSING STOCK. CIT(A) HAS ALSO NOTED THE FACT THAT THE CLOSING STOCK INCLUDES PURCHASES MADE FROM THESE PARTIES WERE SENT ON APPROVAL BASIS TO THE PROSPECTIVE BUYE R AND ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. ACCORDINGLY THE CIT(A) DEL ETED THE ADDITION MADE BY THE AO. 3. BEFORE US THE LD. DR HAS RELIED UPON THE ORDER O F AO AND SUBMITTED THAT WHEN THE ASSESSEE FAILED TO PROVE TH E GENUINENESS OF PURCHASES AND RETURN OF PURCHASES THEN THE AO IS JU STIFIED IN MAKING THE ADDITION. ON THE OTHER HAND THE LD. AR HAS SUPPORTE D THE IMPUGNED ORDER OF CIT(A) AND SUBMITTED THAT THERE IS NO FINA NCIAL EFFECT OF THESE TRANSACTIONS OF PURCHASES AND RETURN OF THE GOODS B ECAUSE NEITHER THERE WAS ANY PAYMENT BY THE ASSESSEE NOR ANY REFUND. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THOUGH THE ASSESSEE COULD NOT P RODUCE THE DELIVERY CHALLAN, TRANSPORT DETAILS AND DETAILS OF OCTROI PA YMENT IN RESPECT OF RETURNING THE GOODS TO THESE 9 PARTIES HOWEVER, THE RE IS NO DISPUTE ON THE FACT THAT THESE TRANSACTIONS OF PURCHASE OF GOODS A ND SUBSEQUENTLY RETURN TO THE PARTIES DOES NOT INVOLVE ANY PAYMENT OR REFUND OF AMOUNT. WE FURTHER NOTE THAT THE CIT(A) HAS GIVEN A CATEGOR ICAL FINDING THAT THE PURCHASES MADE BY THE ASSESSEE FROM THESE PARTIES A MOUNTING TO RS.52,51,714/- WHICH WAS CLAIMED TO HAVE BEEN RETUR NED WAS DULY ITA NO. 2809/MUM/2013 AY: 09-10 4 FORMING PART OF THE CLOSING STOCK AS ON 31/03/2009. THE ASSESSEE HAS CLAIMED THAT THESE PURCHASES WERE RETURNED AS IT WA S NOT APPROVED BY THE PROSPECTIVE BUYER OF GOODS FROM THE ASSESSEE TH EREFORE THE CREDIT TRANSACTIONS IN THE BOOKS OF ACCOUNT OF THE ASSESSE E WERE NEUTRALIZED BY THE RETURN OF THE GOODS PURCHASED. THE ASSESSEE HAS ALSO CORROBORATED THIS FACT OF REJECTION OF THESE GOODS BY THE BUYERS AND ACCORDINGLY THESE PURCHASES WERE RETURNED TO THESE 9 PARTIES BY PRODU CING THE COPIES OF SALES AS WELL AS SALES RETURNS. THE SALES DURING TH E YEAR HAS BEEN REFLECTED BY THE ASSESSEE AS NET OF SALES RETURN AN D CONSEQUENTLY THE GOODS IN QUESTION WERE SHOWN AS PART OF THE CLOSING STOCK. THE CIT(A) HAS DISCUSSED ALL THE FACTS IN DETAIL IN PARA 3.5 TO 3. 9 OF THE IMPUGNED ORDER. THE CONCLUDING PART OF THE ORDER OF CIT(A) IN 3.8 TO 3.9 IS AS UNDER :- 3.8 AFTER GOING THROUGH THE SUBMISSIONS AND FACTS WHICH ARE SUPPORTED BY AUDITED BOOKS OF ACCOUNTS FOR A.Y. 200 9-10 AND 2010-11, AND HAVING FOUND THAT THE CLOSING STOCK IN CLUDED PURCHASES MADE FROM THESE PARTIES WERE SENT ON APPR OVAL BASIS TO THE PROSPECTIVE BUYERS WAS REJECTED; AND CONSEQUENT LY THE GOODS WERE RETURNED AND ACCOUNTED FOR SO IN THE BOOKS OF ACCOUNTS, DESPITE OF THE FACT THAT PARTIES WERE FOUND NOT IN EXISTENCE AS NOTICES SERVED TO THE ADDRESSES GIVEN IN THESE BILL S UNDER SECTION 133 (6), I AM OF THE OPINION THAT HAVING REFLECTED THE REJECTED LOT OF PURCHASES IN CLOSING STOCK, BEFORE RETURNING IT TO APPELLANT'S SELLERS AND THEN ALSO NOT HAVING NOT PAID TO THESE PARTIES, CREDITS SHOWN IN THE NAMES CANNOT BE TREATED AS BOGUS LIABI LITY AS THESE PURCHASES WERE MADE DURING THE YEAR AND BY NO LOGIC THE APPELLANT COULD HAVE IMAGINED AS ON 31.3.2009 THAT HE IS NOT GOING TO PAY THEM AND HENCE LIABILITIES SHOWN IN TH ESE NAMES CANNOT BE TAKEN AS BOGUS LIABILITIES FOR THE PURPOS E OF ADDITION MADE UNDER SECTION 68 OF THE ACT. 3.9 IN VIEW OF THIS FACT THAT PURCHASES WERE DEBITE D FOR THE FULL VOLUME, SALES REFLECTED NET OF RETURN AND CLOSING S TOCK INCLUDED THE SALES RETURN AT COST, I AM CONVINCED THAT THE L IABILITIES SHOWN AS ON 31.03.2009 COULD NOT HAVE BEEN TREATED AS BOG US LIABILITIES BY THE A.O AND HENCE ADDITION MADE BY DISALLOWING O UTSTANDING LIABILITIES IN THE NAME OF THESE 9 SUNDRY CREDITORS AMOUNTING TO RS.52,51,714/- IS DELETED HEREWITH. THE GROUND NO.2 IS ALLOWED. ITA NO. 2809/MUM/2013 AY: 09-10 5 5. WE DO CONCUR WITH THE VIEW OF THE CIT(A) ON THIS ISSUE THAT THE REJECTED LOT OF PURCHASES IS PART OF CLOSING STOCK BEFORE IT WAS RETURNED TO THESE PARTIES WHICH DOES NOT INVOLVE ANY PAYMENTS T O THESE PARTIES AND THEREFORE THE CREDITORS SHOWN IN THE NAME CANNOT BE TREATED AS BOGUS LIABILITY. ACCORDINGLY WE DO NOT FIND ANY ERROR OR ILLEGALITY ON THE ORDER OF CIT(A). 6. GROUND NO.3 IS REGARDING THE ADDITIONAL EVIDENCE CONSIDERED BY THE CIT(A) WITHOUT GIVING OPPORTUNITY TO THE AO. WE HAV E HEARD THE LD. DR AS WELL AS THE LD. AR AND CAREFULLY PERUSED THE IMPUGN ED ORDER. AT THE OUTSET WE NOTE THAT THOUGH THE ASSESSEE PRODUCED AD DITIONAL EVIDENCE IN THE SHAPE OF PURCHASE BILL, TRANSPORT CHALLAN AND L EDGER ACCOUNT SHOWING RETURN OF GOODS PERTAINING TO THESE 9 PARTIES HOWEV ER, THE CIT(A) DID NOT ADMIT THESE ADDITIONAL EVIDENCES AND HELD IN PARA 3 .3 OF THE IMPUGNED ORDER AS UNDER :- 3.3. I HAVE GONE THROUGH COPIES OF PURCHASE BILLS IN RESPECT OF PURCHASES MADE - FROM NINE PARTIES DURING THE PERIO D RELEVANT TO ASSESSMENT YEAR 2009 - 10. THE APPELLANT HAS FILED COPIES OF TRANSPORT CHALLANS IN SUPPORT OF GOODS RETURNED TO 9 CCREDITORS AS ADDITIONAL EVIDENCES. I HAVE GONE THROUGH THE SAME AND IT IS NOTED THAT THESE BILLS APPARENTLY RAISED BY THESE NINE PA RTIES, ONLY MENTION PIECES, THEIR LENGTH IN METERS AND AMOUNT T HEREOF, HOWEVER THEY DO NOT MENTION ANY DETAILS OF TRANSPOR T, ORDER NUMBER AS THE SPACES AGAINST THE SAME ARE FOUND BLA NK IN CASE OF THESE BILLS. COMING TO TRANSPORT CHALLANS FURNISHED BY APPELLANT SAYING THAT THESE ARE SUPPORTING DOCUMENTS FOR GOOD S WERE RETURNED, IT IS AGAIN NOTED FROM THE SAME THAT THER E IS NO MENTION OF ANY TRANSPORT I.E. VEHICLE NUMBER AND THEN THERE IS NO ACKNOWLEDGMENT FOR THE RECEIPT OF THESE GOODS CLAIM TO HAVE BEEN RETURNED. IT IS ALSO NOTED THAT THESE TRANSPORT CHA LLANS ARE UNDER THE LETTERHEAD OF THOSE NINE PARTIES ONLY TO WHOM THE APPELLANT IS CLAIMING AS HAVING RETURNED THE GOODS AND THEY ARE NOT BILLS OF TRANSPORTER. FOR EXAMPLE, IN CASE OF POOJA SYNTHETI CS THE DELIVERY CHANCE VIDE NUMBER 414, 496, 5 TO 0, 567 , 572 AND 712 ALL ARE BETWEEN NOVEMBER 2008 TO FEBRUARY 2009. THEN, IN CA SE OF URVASHI FABRICS AGAIN, IT IS NOTED THAT THE DELIVE RY CHALLANS FURNISHED BY APPELLANT BEARING NUMBER 738 AND 765 A RE DATED 7 DECEMBER 2008 AND 24TH DECEMBER 2008, RESPECTIVELY SAME IS THE ITA NO. 2809/MUM/2013 AY: 09-10 6 CASE FOR OTHER PARTIES NAMED SIMON FABRICS, M/ S A MBICA FABS ET CETERA EXCEPT IN THE CASE OF ONE PARTY NAMED 'HERSC HEL TEXTILE' IN WHOSE CASE APPELLANT HAS PROVIDED TRANSPORT DONE TH ROUGH TRANSPORTER AND BILL IS DATED 26 TH OF MAY 2009. IN VIEW OF THIS FACT THAT THESE TRANSPORT CHALLANS ARE FOUND PERTAINING TO THE PERIOD 2008 - 09 SO ARE SUPPORTING PURCHASES MADE FROM THO SE PARTIES AS IS EVIDENT FROM THE DATE OF BILL AND DATA OF CHALLA NS ARE SAME, HOWEVER-THEY ARE NO PROOF OF RETURN OF GOODS AS CLA IMED BY THE APPELLANT. IN VIEW OF THIS, ADDITIONAL EVIDENCES BE ING NOT TRANSPORT CHALLANS FOR GOODS RETURNED TO THESE NINE CREDITORS , THOUGH CLAIMED SO BY THE APPELLANT ARE REJECTED HERE WITH. 6.1 IT IS CLEAR FROM THE ORDER OF THE CIT(A) THAT T HE ADDITIONAL EVIDENCE SOUGHT TO BE FILED BY THE ASSESSEE WAS REJECTED BY THE CIT(A) AND THEREFORE, THE GROUND NO.3 RAISED BY THE REVENUE IS NOT EMANATING FROM THE IMPUGNED ORDER OF THE CIT(A). IT IS MANIFEST FR OM THE GROUNDS RAISED BY THE REVENUE THAT THE CONCERNED OFFICERS ARE TAKI NG THE MATTERS SO CASUAL WITHOUT EVEN GOING THROUGH THE IMPUGNED ORDE R AND UNDERSTANDING THE SAME PROPERLY. THIS IS A CASE OF GROSS NEGLIGENT APPROACH ON THE PART OF AO AS WELL AS THE APPROVIN G COMMISSIONER TO FILE THE APPEAL AGAINST THE IMPUGNED ORDER AND AUTH ORIZING OF THE GROUNDS OF APPEAL. ACCORDINGLY THE GROUND NO.3 OF THE REVENUE IS DISMISSED. 7. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JULY, 2014. SD/- SD/- (D. KARUNAKARA RAO) ACCOUNTANT MEMBER (VIJAY PAL RAO ) JUDICIAL MEMBER MUMBAI, DATED: 25/07/2014. JV. ITA NO. 2809/MUM/2013 AY: 09-10 7 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.